A Green New Deal?

In her newstatesman.com blog, Green Party leader Caroline Lucas says it's time to make finance the s

After the bursting of the credit bubble in August, 2007 Alastair Darling repeatedly assured us that Britain’s ‘economic fundamentals’ are sound. The implication was that the ‘real’ economy was quite distinct from the bubble economy inhabited by bankers, short-sellers and hedge fund managers. Consumers were given the impression that a firewall existed between them and the bursting credit bubble.

It now turns out that there is no firewall; even the chancellor has to acknowledge negative feedback loops between the financial economy and the real economy. It is not possible, after all, to compartmentalise within the economy, any more than it is possible to erect firewalls between the ‘real economy’, the credit bubble, and climate change.

It is clear that the three are inextricably linked.

Easy money has financed easy shopping, and easy shopping has boosted production and energy use in countries around the world. As we re-financed mortgages, maxed out on credit cards, invested in buy-to-lets, shopped for 4x4s, handbags and sports trainers.

So we burned more finite supplies of oil and coal, and this boosted manufacturing and production in far-away places, and powered economic growth. And as we burned up these precious, scarce resources, as we stripped more forests, farmed more land, fished more fish – so the earth grew more dangerously warm and less diverse.

Somehow, something, somewhere had give. These old ideas - that we could live forever on borrowed money and on borrowed time and that there are no limits to the earth’s resources – were a series of bubbles that had to burst.

The credit bubble was the first to go - on 9th August, 2007 when banks froze lending and plunged the global economy into a crisis that is still unfolding today, and becomes more terrifying as each day passes.

The shopping bubble has proved more resilient. While there are signs that UK consumer confidence is waning, the government’s national statistics office announced in August that growth, albeit moderate growth “in retail sales volume is driven by strength in clothing and footwear stores.”

So we are still shopping for clothes and shoes. So much so that developers are confident enough to open three new massive shopping centres in London, Liverpool and Bristol.

But while we shop, an even graver threat than the financial crisis is looming: the ‘bursting’ of the greenhouse gas bubble.

The melting of Arctic sea-ice, the rise in methane emissions, rapid de-forestation and increased droughts all create positive feedback effects. Forests are no longer carbon dioxide absorbers, but instead produce carbon dioxide. Thick permafrost no longer bottles up methane; instead it melts, spewing out methane and magnifying climate change.

And still the Labour government baulks at the scale and urgency of the threat to our security. And at the scale of adjustment, adaptation and investment needed to address the threat. Britain’s economy must undergo a major structural adjustment, to adapt to the threat posed to our security by climate change.

But, while the financial adjustment is already happening - albeit chaotically - the economic adjustment has yet to be addressed.

Just two weeks ago Labour ministers seemed to promise an expansion of airports, motorways and coal-fired power stations. We were offered no leadership, no vision of the much more ambitious drive for energy efficiency that is needed, or of the large-scale alternative energy investment that is vital to our security.

What is the way forward? Along with eight other green economics experts, I have co-authored a report that shows us the new direction we need.

We need a Green New Deal, based on increased regulation of the finance sector, so that finance once again becomes servant to the economy. As in the New Deal era of the 1930s, we need low interest rates and minimal tax evasion if we are to finance the massive investment needed for a multi-billion pound crash programme to make every building in the country a power station, while maximising the UK’s use of small and large-scale renewables. We need to mobilise a carbon army of green-collar workers to implement this programme. Finally we need to localise the production of food, and build a more sustainable local economy in food and other resources.

It is only such a programme that could give the people of Britain hope; that could help Britain survive this crisis, and enable our citizens to live better, more happily, and within the limits of our ecological budgets.

Caroline Lucas is the MP for Brighton Pavilion.

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Hopes of an anti-Brexit party are illusory, but Remainers have a new plan to stay in the EU

Stopping Brexit may prove an impossible task. Remainers are looking to the "Article 49 strategy": reapplying for EU membership. 

The Remain campaign lost in the country, but it won by a landslide in parliament. On 23 June 2016, more than two-thirds of MPs voted for EU membership. Ever since the referendum, the possibility that parliament could thwart withdrawal, or at least soften it, has loomed.

Theresa May called an early general election in the hope of securing a majority large enough to neutralise revanchist Remainers. When she was denied a mandate, many proclaimed that “hard Brexit” had been defeated. Yet two months after the Conservatives’ electoral humbling, it appears, as May once remarked, that “nothing has changed”. The government remains committed not merely to leaving the EU but to leaving the single market and the customs union. Even a promise to mimic the arrangements of the customs union during a transition period is consistent with May’s pre-election Lancaster House speech.

EU supporters once drew consolation from the disunity of their opponents. While Leavers have united around several defining aims, however, the Remainers are split. Those who campaigned reluctantly for EU membership, such as May and Jeremy Corbyn, have become de facto Brexiteers. Others are demanding a “soft Brexit” – defined as continued single market membership – or at least a soft transition.

Still more propose a second referendum, perhaps championed by a new centrist party (“the Democrats” is the name suggested by James Chapman, an energetic former aide to George Osborne and the Brexit Secretary, David Davis). Others predict that an economic cataclysm will force the government to rethink.

Faced with this increasingly bewildering menu of options, the average voter still chooses Brexit as their main course. Though Leave’s referendum victory was narrow (52-48), its support base has since widened. Polling has consistently shown that around two-thirds of voters believe that the UK has a duty to leave the EU, regardless of their original preference.

A majority of Remain supporters, as a recent London School of Economics study confirmed, favour greater controls over EU immigration. The opposition of a significant number of Labour and Tory MPs to “soft Brexit” largely rests on this.

Remainers usually retort – as the Chancellor, Philip Hammond, put it – “No one voted to become poorer.” Polls show that, as well as immigration control, voters want to retain the economic benefits of EU membership. The problem is not merely that some politicians wish to have their cake and eat it, but that most of the public does, too.

For Remainers, the imperative now is to avoid an economic catastrophe. This begins by preventing a “cliff-edge” Brexit, under which the UK crashes out on 29 March 2019 without a deal. Though the Leave vote did not trigger a swift recession, a reversion to World Trade Organisation trading terms almost certainly would. Although David Davis publicly maintains that a new EU trade deal could swiftly be agreed, he is said to have privately forecast a time span of five years (the 2016 EU-Canada agreement took seven). A transition period of three years – concluded in time for the 2022 general election – would leave the UK with two further years in the wilderness without a deal.

A coalition of Labour MPs who dislike free movement and those who dislike free markets has prevented the party endorsing “soft Brexit”. Yet the Remainers in the party, backed by 80 per cent of grass-roots members, are encouraged by a recent shift in the leadership’s position. Although Corbyn, a Bennite Eurosceptic, vowed that the UK would leave the single market, the shadow Brexit secretary, Keir Starmer, and the shadow chancellor, John McDonnell, have refused to rule out continued membership.

A group of Remainers from all parties met in the Labour MP Chuka Umunna’s office before recess, and they are hopeful that parliament will force the government to commit to a meaningful transition period, including single market membership. But they have no intention of dissolving tribal loyalties and uniting under one banner. A year after George Osborne first pitched the idea of a new party to Labour MPs, it has gained little traction. “All it would do is weaken Labour,” the former cabinet minister Andrew Adonis, a past Social Democratic Party member, told me. “The only way we can defeat hard Brexit is to have a strong Labour Party.”

In this febrile era, few Remainers dismiss the possibility of a second referendum. Yet most are wary of running ahead of public opinion. “It would simply be too risky,” a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result.

Thoughtful Remainers, however, are discussing an alternative strategy. Rather than staging a premature referendum in 2018-19, they advocate waiting until the UK has concluded a trade deal with the EU. At this point, voters would be offered a choice between the new agreement and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be history. The proviso is that the EU would have to allow the UK re-entry on its existing membership terms, rather than the standard ones (ending its opt-outs from the euro and the border-free Schengen Area). Some MPs suggest agreeing a ten-year “grace period” in which Britain can achieve this deal – a formidable challenge, but not an impossible one.

First, though, the Remainers must secure a soft transition. If the UK rips itself from the EU’s institutions in 2019, there will be no life raft back to safe territory. The initial aim is one of damage limitation. But like the Leavers before them, the wise Remainers are playing a long game.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear